MLB pitches DirecTV deal

Satellite broadcaster circles bases

New York — DirecTV has signed a controversial deal with Major League Baseball that will keep the MLB Extra Innings package of out-of-market games on the satellite distributor for seven more years.

The controversy arises out of the fact that the deal is, in effect — and for the first time — exclusive to DirecTV. That exclusivity will deprive about 230,000 cable subscribers and EchoStar’s Dish customers of Extra Innings, beginning next month.

MLB said if the deal turns out to be exclusive, it’s the fault of cable TV and Dish, which have rejected baseball’s offer for Extra Innings.

But MLB and DirecTV have “designed” the offer “to be impossible for cable and Dish to meet,” said Robert Jacobson, president and CEO of In Demand, which negotiated with MLB on behalf of Comcast, Time Warner Cable and Cox Communications, the second-, third- and fourth-biggest cable operators in the U.S.

Jacobson is referring to MLB’s demand that cable and Dish agree to place a new 24/7 MLB channel on the widest-circulated analog tier when the network opens for business in 2009. (DirecTV has agreed to put the MLB channel on its most deeply penetrated tier, reaching about 15 million subscribers.)

Cable operators say they’re not giving any new nationally distributed cable networks a slot on expanded basic (which reaches more than 95% of subscribers on a cable system) because that analog tier is too valuable. The latest technology can transform one analog dial position into as many as 10 digital ones.

Even the 24/7 NFL Network, which features eight regular season pro-football games each year, has clashed in the courts with Comcast and Time Warner, both of which are ruling out analog clearance.

Comcast, Time Warner and other cable operators like Chuck Dolan’s Cablevision want to pitchfork the NFL Network and the MLB Channel to a digital sports tier. That blueprint is unacceptable to the NFL and MLB because sports tiers, which cost subscribers an extra monthly fee, have not succeeded in attracting enough viewers to draw Madison Avenue’s interest.

Regarding the MLB Channel, cable operators also argue that it’s unworthy of getting a dial position on expanded basic, even if it offers live regular-season games.

The reason: Fans who live in cities with MLB teams get most or all the local team’s games on their regional sports channels.

ESPN, which is available to all cable subscribers and EchoStar customers, schedules a massive number of primetime games each year, supplemented by the Fox Network’s schedule of Saturday-afternoon contests.

All the postseason games are covered by a combination of Fox, TBS and ESPN.

In a Thursday afternoon conference call with reporters, Bob DuPuy, president and chief operating officer of MLB, said his deal with DirecTV “will have no impact on our contracts with Fox, ESPN and TBS.”

If the MLB/DirecTV deal ends up de-facto exclusive, the satcaster will pay a cool $100 million a year for seven years for the rights to Extra Innings.

DirecTV plans to mine that exclusivity for all its worth. Its president and CEO Chase Carey said DirecTV plans to “invest millions of dollars” in Extra Innings “to deliver a spectacular fan experience.”

There’ll be more games in high def, Carey said, and what DirecTV calls “a game-mosaic channel” will allow viewers to watch a multitude of games at one time.

Further, a strike-zone channel set up by DirecTV will permit “live cut-ins of MLB games in progress at key points.”

DirecTV is so gung ho about sports exclusivity it also ponies up a humongous $3.5 billion for exclusive rights to “NFL Sunday Ticket,” pro football’s out-of-market games.

The motivation behind the NFL and MLB contracts is defensive: DirecTV is losing market share to cable, which can offer its subscribers a triple play of video, telephony and high-speed broadband. The technology doesn’t allow DirecTV to match cable’s triple-play strategy.

The satcaster is planning a marketing campaign aimed at cable customers who are so beside themselves at losing Extra Innings that they’ll cancel cable and shell out for DirecTV’s satellite dish.

To make the switch even more enticing, said Carey during the conference call, “we’ll give new customers free equipment and free installation.”